The Goods and Services Tax ( GST ) department has issued notices and asked the tax payers to produce documents for detailed verification of transitional credits claimed. Earlier, the department had identified around 50,000 tax payers assessees in terms of the claims for further analysis.
Under the new tax regime, the businesses are allowed to claim credit for central taxes (excise and service tax) paid on the stock bought in the pre-GST regime but sold after July 1, when GST came into existence.
However, shockingly, nearly 9.5 lakh assessees have claimed a massive Rs 1.6 lakh crore as such credits till the December 27 deadline. Stunned by the lower revenue numbers from the GST during the initial months, the government has decided to probe on “unusually high” claims.
“For verification of the said credit you are, hereby, requested to furnish the copy of Trans-I return along with stock statement and copies of purchase documents for the said stock,” an email sent by the department said. The taxpayers had taken credit in Trans-1 return against the stock as on June 20, 2017, or of the credit lying in the balance as on the same date.
The notices issued by the department mandated submission of a copy of the Trans-1 return along with copies of returns filed under the excise and service tax regime for last six months in the next two days.
Further, in case of credit taken against capital goods, the copy of the Trans-I return with copies of purchase invoice and Cenvat credit register have to be furnished for verification. The suspicion of large-scale malpractice prompted the government to initiate an investigation on such claims in September. However, a cursory inquiry failed to find any substantial wrongdoing. Following up, the Central Board of Indirect Taxes and Customs (CBIC) has drawn a year-long timeline for detailed verification of such claims in phased manner. For instance, businesses have claimed credit for service tax paid on offsite meetings and taxis used by employees even though these are explicitly disallowed in the GST law.
